The minister’s search and call profile contains the statement, “It is the expectation that the congregation will pay for the expenses of moving the pastor to the new location. Best practices suggest that the pastor obtain three estimates. The congregation and the pastor determine together which best fits the needs of the pastor and congregation.”
In negotiating a call with a new minister, the minister and congregation or organization should plan to cover all or part of the minister’s relocation expenses. This negotiation should be settled before the minister or congregation agree to the letter of call. The initial letter of call should clearly identify how moving expenses will be covered. The congregation may choose to pay for the move through a moving service, in which case the minister should obtain three estimates and provide these to the congregation. The congregation may also choose to provide a moving allowance.
Until 2018, employer reimbursements for qualified moving expenses were excluded from gross income. The Tax and Jobs Act of 2017 removed that exclusion. This also applies to expenses paid to a moving company on behalf of the employee. The minister will have a tax liability for any reimbursement of moving expenses.
Since 2018 congregations who assist their ministers with relocation expenses should report that to the IRS. If the church pays the minister directly the amount should be added to the minister’s W-2 that year in Box 1. If the church pays the moving expense directly to a moving company, they should issue a Form 1099-Misc to their pastor and enter the amount in Box 7.
Since the minister will owe both state and federal income tax and self-employment tax on this amount, congregations are encouraged to give their new minister an additional 25% above the cost of the move to cover the tax liability.
The congregation should report the reimbursement as income to the IRS in the year the payment is made, even if the move occurred in the previous tax year.